tv Fast Money Halftime Report CNBC July 11, 2012 12:00pm-1:00pm EDT
>> i thought that was the traders. new nicknames. that's it for "squawk on the street." thank you very much for watching. the "fast money halftime report" begins with scotty right now. all right, simon, thanks so much. four hours to go until the close. here's where we stand. a tie score at the half. a split market right now in terms of going inside the number. here's where we stand. industrials down by .5%. s&p just ticking barely into positive territory. watching the nasdaq as well today, obviously. there it is behind me. loss of about .5%. fo crude oil up. gold down. also what we're following on "halftime" today, commodity craze. corn continues to rip higher as the drought continues to kill crops. we're trading it with the head of commodity research from credit suisse. ibm at risk? what's the street missing on the tech giant that could have you
singing big blues? back from the brink. we continue our series of stocks left for dead that may be seeing signs of life. today's pick, barnes and noble. welcome to the halftime show. joe terranova, what are you trading today? >> well, i'm focused on financials. i'm focused on companies that are giving us solid u.s. earnings. now, in the financial space i said this the other day on monday. i truly believe the earnings results from jpmorgan and wells fargo will be a catalyst for the market and put financials back in some form of a leadership role. pnc. one of the regional banks i'm playing. came down, filled the price gap it had at the end of the month from june 28th, 29th. great low risk point of reference. 200 day moving average 58.70. i'm adding to my longs aggressively today. >> stephanie link walked in with a smile today. she sold out of cummins before they warned and really spooked the market. that was a big warning they had. you were nimble enough to get out of it before they did that. >> well, in full disclosure we
sold at around 100. we missed it to 125. >> you can't get every last penny every single time. >> we didn't get a lot of news yesterday, right? cummins, applied materials, amd, across the board not great. i did like what i heard from general mills. reiterated guidance. talked about decent volume improvement. they're hedged at least for now. >> the ceo who was on cnbc yesterday said commodity price inflation wasn't going to be nearly as sharp as some people have been talking. i think he said 2% to 3% whereas the comparison was maybe some people were looking back and saying it could get close to 10%. that could be a real problem. >> the important part of that, they're also investing in their businesses in the acquisitions they made. we own it for the fund and we'll continue to buy when we can. >> what are you trading today? gl that's the one we actually want to buy. we're restricted right now. we actually trend a little bit of suntrust. i agree with joe. i think the financials, friday is going to be a big day. suntrust has had a nice move off its low. we're trimming it back. >> simon baker? or selling?
>> i know we're going to talk about -- obviously what's going on with the corn yield forecast coming down. we're buying potash. talking a little bit later. those are in play and continue to be strong. >> grasso, what are you doing? what kind of ordering coming in today ahead of fed minutes later on that are closely watched? >> definitely seeing some bottom pickers, basically. joe really nailed it, though. the market is really waiting for the financials to come out and just see where the guidance is from there. see what the earnings look like. they're going to be directionality players for us. everyone is poised, waiting on friday. i think you could really look at this level as just moving sideways until then. until people start getting whispers about what's going to happen on friday. >> corn is the big story. it continues to be in the commodity pitch. futures spiking again on today's usda crop report. as you know, corn futures have been on the rise. today projecting that corn yields will be the lowest since
1988 due to record setting heat and severe droughts in the midwest. rick defrel is head of commodities research at credit suisse. good to have you. >> thank you very much. >> headline of your note today, s cyclical dip or the beginning of the end? which is it? >> we think it's probably just a cyclical dip. we would say what matters for industrial commodity prices will be growth going forward. we don't think growth rebounds to anything like the kind of pace we saw on a global level 2003 to 2007. commodity should rebound a little bit last year. it's going to be pretty tepid to what people got used to in the 2000s. >> if you poor insire inside yo today you go one by one. oil, you have a neutral to flat price target. you're somewhat negative on where crude oil goes from here. i guess those china trade numbers that came out a couple of days ago certainly don't help
the upside story in crude. >> yeah. i mean, crude, again, is an interesting commodity in that if you now look at the data, it's very obvious that global demand growth has been very flat. in seasonally adjusted terms, it hasn't grown for 18 months now which is really, really soft. on the supply side it's very clear the saudi arabian government have stepped up. they've played their role as the central bank of oil. pumped more oil than people thought they would. supply greater than demand at the moment. that's what's driven price down. we don't see that changing materially in the near term. prices are likely to go sideways or even down a bit in the next month or two. >> gold and silver, cautious on both. why? >> gold is a very interesting one in that gold is one of these metals that's driven a lot by technical factors. it's kind of hit a very key technical point to the downside. we think that the most likely thing is that you get a bit more qe-3 and that gold rallies a little bit through the end of the year. if the fed disappoints and doesn't come to the party, we thipg it could actually crack
down through the bottom of that resistance level and fall quite heavily. really depends on what happens with policymakers in america. >> nat gas. cautious with pushing on three bucks. where do we go from here? >> again, my guess is that as you move into the next year, the price has to go up. i do think it takes a bit longer than some people think. i think we're at levels that are unsustainable at the moment. but it will take some time to get some more balance in these markets. >> joe terranova? >> ric, it's joe. last evening i moderated a morgan stanley event. most of those in attendance asked about buying the commodity dip. i basically told all of them forget about the commodity trade for the remainder of the year. do you agree with that? do you see anything in the near term that acts as a catalyst to restart upward momentum? >> the next six months is going to be all about global growth. if our economists are right and you get a bit of a trough in q-2 and things pick up over the remainder of the year, a lot of industrial commodity prices will move up a bit. what's interesting, if you look historically, when you've got average gdp growth at a global level that's 3.5%, commodities
are normally flat. we all got used to commodity growth in the 2000s. that was because gdp growth at a global level averaged 4.6% in the four years up until 2007. i don't think we're going back to that world. i don't think we're getting that kind of strong global growth any time soon. i don't think you get the aggressive moves we saw in the last decade. >> how about corn? how much more is left here? >> well, again, we're kind of sort of stabbing in the dark now in that we know the weather has been terrible. we know that the models are saying that yields are going to fall off heavily. we don't really know what's going to happen. my sense is we've moved a long way and it's probably all in the price at the moment. as we go into august and as the usda gives us more insight into what's actually happening on the ground, i think you just get some very big moves. it could be up or down. it really depends on what happens in the next couple weeks with the weather. >> simon baker has something on coal. >> i hope you got tickets for the olympics.
pretty tough to get, i heard. patriot coal went out of business yesterday. obviously with the price of gas continuing to be low and get lower are you going to see other players in that space get out of business in the near future? >> i think it's a really tough industry. i think it's the classic example of how -- say prices will go up forever. when you get high prices it eventually kills high prices. we've seen a technological revolution in natural gas spilling over into thermal coal market. the main reason prices have come down there's coal gas substitution going on in the united states. i don't see the price rebounding soon. a lot of players in the u.s. in particular are going to struggle. >> great to have you on the show. thanks again for sharing your insights today. we'll have you back on soon. joe terranova, give me a trade. industrialwise first. >> i've said it before, scott. i have no interest right now being in the commodities space.
look at the corn space itself, i know there's been a lot of enthusiasm regarding the futures price of corn, soybean and wheat. i will point out corn has actually reversed and now lower for the day. look at the ferts which herbally is the correct play off of higher pricing in the grains. they are underperforming up until today. i think that's telling you the story. i think it's telling you to avoid the space. i think it's telling you to look at u.s. producers who are continuing to benefit from favorable input commodity prices. that trend is going to continue. >> stephanie link, what do you do with the ferts? >> i kind of like cf. i think it's trading about 3.6 times ebida. pretty cheap. demand has held up. probably gets a little better. we're not involved in any of those names. we actually own dupont suffering a little today. their comments yesterday were that tio 2 prices are staying pretty firm. they have an ag component. a health care and nutrition component. they're more diversified. it's a wimpy way to play it but
it's what we're doing. >> fwras sgrasso, our children corn play. tyson, sanderson farms, those sort of names. are you looking at them? what are you watching today in the space? >> a couple of nights ago on the 5:00 p.m. show i said i hadn't been seeing much buy side activity in tyson. it used to be a favorite name amongst the investment community. it sort of dissipated and guys are avoiding it. i started to avoid it as well. but off of this dip, and i know there's a lot more to come down the pike, off of this dip the sell side in tyson seems a little bit overdone. but i'd be wary of playing it. obviously you're playing a very risky space in this point in time. >> time for pops and drops, the midday market movers that might not yet be on your radar. first one up today is abercrombie & fitch. it's popping 5%, grasso, one you follow closely. >> the stock has been up basically 24% in a very short period of time. this is one that is being battered because of its european exposure. but when you look at this, we've
heard takeout rumors. we've heard private equity rumors. we've heard a bunch of that stuff at double the price it is right now. i would be a little bit hesitant to pay this price. once it settles in, i think your downside is limited. >> stephanie link, international paper getting a 3% bump. >> speculation they're going to get a container board price increase which is kind of flies in the face of the u.s. economic slowdown. very surprising. we'll see if it sticks. >> joe, waste management drops 5%. >> morgan stanley takes this from equal weight down to underweight. the stock performance has been very disappointing for those that have made the fundamental argument so far in 2012. i agree with the call. it is not a name that i think you would to buy on the dip. >> simon, veriphone. >> 10% on announcement of a deal between $34 million and $35 million with a taxicab company in colombia. >> pop for baseball cards. you may want to hang on to that
old collection you've been hoarding. an ohio man recently discovered a box in his attic filled with rare 1910 baseball cards incrude colluding ty cobb, cy young. his collection could be worth $3 million. some going on the auction block right away for maybe $500,000. lucky him. coming up, joe lavorgna joins us with his slashed and just slashed gdp forecast. plus, is wall street ignoring the risks at a blue chip tech darling. is walmart back from the brink? our series continues on "halftime." looking for a better place to put your cash? here's one you may not have thought of -- fidelity. now you don't have to go to a bank
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welcome back to the halftime show. moments ago deutsche bank cutting second quarter fwrks dp growth forecast by a whopping 1%. joe lavorgna is deutsche bank's chief u.s. economist and cnbc tribute to contributor. one point. that's a big move. why? >> i think, scott, what we've seen in the last few weeks is numbers turn out weaker than what we thought. and today's trade numbers, i think, kind of pretty much crystallize the fact that exports aren't going to be strong enough to really help us
this quarter as we thought was the case earlier on. and we just bit the bullet and made the full point cut. to tell you the truth, i wouldn't be surprised after revision if we're actually lower than that post the q-2 results at the end of this month. >> you think inevitably we go into recession again? >> no, i don't. i still actually am somewhat constructive on the outlook. the pieces we've been writing recently have reflected or rather have tried to make the point that the household sector, despite this very weak and uneven growth, the household sector below all this is actually improving quite a bit. we've seen continued declines in household debt to gdp. and, more importantly, we've seen a very nice recovery in household liquid assets to liabilities. i just think this economy needs a catalyst. it needs a spark. maybe it could come from europe. but the fundamentals are there. we need those animal spirits back. we just don't see them at the moment. >> is that going to come from the fed, joe? >> no, i don't think so. in fact, i've been somewhat
critical of these unconventional policies which have become increasingly more conventional. i think, scott, it's hurt confidence and business sentiment. i'm afraid now with these numbers looking worse, the probability of qe-3 goes up. i just don't see how that's positive for business decision making when the central bank has done these operations. they're doing it just to appear to do something. and there's no real tangible payoff from these with rates already at record lows. >> joe, as you know i'm surround bid trade rs on this terranova >> look at lower energy prices in particular, oil itself, when do you see the economy sees a benefit from that if at all? >> i think we're seeing it right now which is why vehicle sales did improve last month relative to where they were in may. the general rule is one penny on gas is worth $1 billion of household energy tax cut. so i think we will get a lift in the second half which is why even though we've become very negative near term, we have yet to change our second half
forecast which does see growth improving into the mid to high twos. that is, joe, in part a function of what you said on gas. that should give the consumer a nice lift. >> sounds like, joe, you were ready to pull the trigger on this move after the disappointing jobs report and the weak ism manufacturing report last week. it's the trade data today that tipped you over? >> that's right. that and also the inventory numbers from last week on the factory side were softer. the wholesale numbers this morning which nobody pays attention to, they showed a small downward revision to one of the previous months. and my guess is tomorrow we're going to see some weak defense numbers. which is ironic. we've had this big pullback from the middle east. it is possible, scott, we will have seen in the last three quarters the biggest pullback in military spending since the cold war if not even greater. that's also weighing on output. >> what's the most rtant thing we'll get out of the fed minutes today? >> i don't think anything positive other than the fact they're concerned about the
outlook. they effectively went to an easing bias last month. i think it's going to keep the market on edge expecting more qe. and that's going to keep investors away because i think people look at thisa rigged mar. treasuries with little volatility, flat curve, low yields. market signals are really meaningless. unfortunately it means people are going to step away from the markets and sit and wait. it's bad for risk taking, bad for growth. >> 1.50 on the 10-year is what we're yielding now. how low do we go? >> our strategist had a very good call. think it goes to 125. i think personally rate should be at 3%. somewhere between 1.25 and 3. >> good to have you. thanks. >> stephanie link, this is a big move of one point down on a forecast. >> it's big. he was one of the optimists out there. i think most people were thinking after the data last week that at very best you were looking at 1.5% gdp growth. in terms of what joe had said in terms of lower oil prices,
better home prices and activity, what china's doing, being pretty aggressive, i think you can see a snap back from the 1.5%. i think maybe mid-2s might be a little aggressive. high end retailer burbury getting slammed today after reporting a decline in first quarter sales growth. disappointing report for that company providing more evidence of china's economic slowdown. the luxury retailers tiffany and coach both with heavy china exposure are falling as well. this is the last thing that the high-end bull needs to hear. >> it's not only high end, right. if you looked at what levi strauss said yesterday, they saw the weakest numbers in two years. the apparel manufactures have risk as well. in terms of burbury, it's not really that surprising. it's one of many companies that have actually announced tis appointing results. i do think tiffany's is interesting just on a valuation play. but i think you've fwot to wait until the fourth quarter until comps get easier.
we've been picking at nike very slowly. under 90 i think is a better buy. i think the bad news is out. i think lower raw material costs will help them. they've got new products and catalysts down the road. >> grasso, this is another notch in the belt of those who think the high-end consumer is about or already is rolling over. if you couple that negative news that still hangs over that space from tiffany and then put burbury in that category and now if you have to start wondering whether lou frankfort at coach is having the same issues in china what do you do? >> look at travelers to the united states. that market is weak. look at asia markets. that market is weak. i'd rather just stay away from luxury. stick with what's been working. stick with wag mart. i'd rather stick with a target. i think you get much better bang for your buck there than to try to catch this knife on the other side of the luxury brands. >> simon? >> i'd rather stay with what is working. >> sometiimon baker? do you look at this weakness? does it start to get attractive
as tiffany tastarts to look to stephanie link? >> we had deb on from citigroup. the discount is -- things around where you do see strength in the housing with the lows. home depot. wells fargo. the mortgage exposure. you've got to be a lot more direct and stay on the low end or with themes. >> joe terranova, what's your trade here? >> the trade is you actually fut a short out on some of the european luxury names like prada or qpr which iowns gucci. coors. between 39 and 40 is a place you want to enter. >> what about some of the lower end names? >> some of the lower end names will hang in there well. stephanie mentioned before nike. look at what nike told us a couple weeks ago, now the subject price action has been favorable. i'm a long with stephanie. adding as it continues to move above 90 and holding there. the story has been all about the type of markets, the targets, walmarts. they are going to continue to
win in this environment. to the credit of steve grasso, he's continually pounded the table on staying with the trade that is working. the trend is your friend there. >> all right. next trade, shares of ibm trading near all-time highs today. but is wall street ignoring risks associated with this ultra popular stock? cnbc's herb greenberg has been looking at the story and joins us with more. it's interesting, herb, this comes on a day where a couple wall street firms are starting to get a little bit cautious. ubs, ma lon vich, we're going to have on the show in a little while. there was another firm out there as well that lowered the price target. >> timing is everything. look, there is no question, scott, that ibm has been a spectacular stock. ranking up there with apple. thanks, largely, to its transformation away from being a commodity tech company. both apple and ibm are currently trading at around all-time highs. but here is the rub. apple continues to grow like there is no tomorrow. with revenue last quarter up
58%. ibm, on the other hand, up only .3%. not only tuz ibm get a growth multiple, but on a going forward basis it's actually valued a little bit higher than apple. if you look today on cnbc.com, much of this is because ibm has convinced investors, including warren buffett, to view it not on revenue growth, not on earnings growth, but earnings per share growth. not just any earnings per share growth. but what it calls its 2015 road map for its growth. this is where the company lays out almost to the penny how it will get to $20 a share by 2015. that's about 49% above last year. that's all investors really seem to care about. whether ibm meets or beats that number. that gets to the issue, of course, earnings quality. some accounting concerns which fred hickey of the high-tech strategist newsletter actually tackles in a very lengthy analysis in his current issue.
ibm will not talk because it's in its preearnings quite period. its whole mantra is gross margins, free cash flow have all gone over the roof over the past decade. >> ibm itself has used words like at least in terms of meeting these targets of the 2015 road map. is your point that they've invented this road map, right? they've said this is what -- it's not like somebody outside said we want them to meet these goals. they've said this is our target and we're going to blow away our own invented targets? >> that's what wall street is looking at. look, companies will always come out -- often will come out with their metrics. look at nongap. look at this. look at that. investors typically say, okay, the company says we should look at it. what fred is pointing out in his piece, i certainly point out, here you've got an industry that is absolutely facing headwinds. economic headwinds. dollar headwinds. all sorts of headwinds. ibm is priced at a level some people would suspect it could not -- it's priced for perfection. it cannot afford to have somewhat of a miss. >> stephanie link?
>> well, i don't disagree with a lot of what wrour saying. but this is a high quality company, right? people have been hiding in it. this company has been growing double digits for years. you don't pay -- >> not on the top line. >> definitely not. but that's not what you're paying for. you're paying for the fact they've already transitioned from hardware to software services. they've got 50% of their business is recuring revenue which is a big deal. and, by the way, they're taking some share from hewlett-packard's services business which i think is a positive. i'm not bear. i'm not long the stock. we owned it in the past. i would love for it to pull back and to buy it. it would have to pull back -- >> when you're looking at one number, again, i think the street -- if you look at steve's piece, he points out, road map. on the track to beat the road map he makes a big part his section. they're going to beat it by a dollar. >> they said it themselves. ibm said it, again, using words like at least. they know they're going to meet the road map. it's by how much do they exceed. >> you're starting to get into these -- you could look at the balance sheet. is the balance sheet deteriorating? they're adding debt to buy --
here's a company with tremendous cash flow. they're adding to their tet to buy back their own stock because the prices are so good, obviously. >> people do not expect double digit revenue growth for ibm. they do expect it for apple. they're looking for buy backs. they're looking for any way they can get the double digit earnings. you also get -- you get -- >> what i'm pointing out is one thing. i think it's an important thing. there's risk here at these levels. anyone who thinks there isn't -- if they miss -- if there's any suggestion, a whiff of a miss. >> of course. >> look at last quarter. >> that was on the revenue side. that's the issue. earnings quality, there's a big one time gain. there was a tax issue on the revenue side last time. on the earnings side. which actually helped earnings a little bit. >> poor simon baker caught in the middle of this discussion. let me also clarify something i said earlier from the note. his price target is actually 205. not where the stock is now. he's going to be on. herb, thank you as always. simon baker, what's the trade? >> you're a lot better looking in person than on television. i'm sitting next to you.
secondly, if you want to be in that space, computer associates is a great company. it has got growth. it opportunity have silly little charts from the management. if you're going to own a stock, computer associates. >> interesting because of what people would have said about that company five or six or seven years ago. >> people like you, herb. thanks, man. coming up on "halftime," beware of falling forecasts. the trade on an appliance and electronics company that just warned. apple's next frontier. a top wall street analyst making a big call on the apple empire. ubs the aforementioned steve miluno milunovich is next. you have to dig a little. fidelity's etf market tracker shows you the big picture on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity.
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[ male announcer ] and step out of the shadows. hi! how are you? [ male announcer ] learn more at isitlowt.com. [ laughs ] hey! about halfway through the trading day now. here are as always our top three trades at the break. we start with h.h. gregg. the appliance and electronics chain cutting its full-year outlook as it faces shrinking te mand and higher costs. best buy also falling in sympathy. sim simon, take a look at both of these. h.h. down 39%. >> we've talked about best buy a lot. being the showroom for amazon isn't fun. >> dean foods lower following the release of that crop report which we've talked so much about, joe. >> cut from an overweight back
down to an equal weight. getting a significant pulloff. july 3rd was a 52-week high at 17.25. i take the other side of this downgrade. i think you buy it. milk prices continue to be benign. i think input costs will remain relatively low. also understand, dean foods is in the midst of a liquidity turnaround. moodies raised their current rating on june 28th. >> jpmorgan reportedly planning to claw back millions of dollars in stock from executive at the center of the whale trade. in an exclusive interview june 13th on the halftime report mary thompson asked ceo jamie dimon about that possibility. >> obviously there are people directly involved. there's some people indirectly involved. we'll think that through. this is going to set precedence for the company. there's a right thing to do and wrong thing to do. we're going to do the right thing when we figure out what it is. we're not going to do the bloodthirsty thing, the thing that makes the press feel great. the right thing for the company and people aum things considered. >> i think he handled that pretty well. >> as he usually does. >> he does.
i think that surprised some people. we continue to own jpmorgan. we continue to buy it in the low 30s. quarter is on friday. everybody knows about that. we'll learn about the loss. more disclosure there. i want to know about loan growth. i want to know about the underlying fundamentals at the company. that's the reason why i want to own this for the longer time. longer term if he says some good things. >> somebody who owns the stock, right, has a lot of conviction behind it, you say you're looking for pull backs to continue to buy it. what are you expectations on friday? how do you feel going into it? are you optimistic? are you nervous? what are you? >> i think it's going to be mixed in terms of the quarter. i think you're fwoing to have crummy capital markets, crummy fixed business. we all know that. i think if the stock kind of stays here, even if it weakens into the print that's a better setup. if it rallies into the print i'm not as crazy about that. again, i think we've got to learn more about their loan growth, more about this big giant loss and how they're
handling it. we want to learn about their balance sheet, the buybacks. there's a million things we've got to check off here. i do think i like it. i like it in the low 30s for the longer term. >> ubs initiating coverage on apple today with a buy rating $740 price target saying the apple empire has not yet reached its zenith. steve milunovich joins us with his call. . i want to get to apple in a second. let's button up the conversation we were having i hope you heard earlier with our herb greenburg about ibm. you've assumed coverage today with a neutral rating, $205 price target. what about the thought the street bought into the road map ibm laid out yet you have to be concerned about top line growth. >> they have bought into it. the company in the past has made the road map. we think they'll make the current road map. i heard herb talk about the lack of revenue growth. the company has created substantial cash flow
improvement over the last five to ten years. it hasn't come from revenue growth. it's come from largely margin improvement and balance sheet management. that's real. that's fair. in fact, we think free cash flow is probably the best way to value these i.t. hardware companies like ibm. we think they're going to make that $20. but the question is what do you pay for that? we think the stock is fairly priced here. the question is at some point can you continue to get those earnings growth, get that free cash flow with reduced revenue growth rate? they have historically going forward. it might be a bit tougher. >> when you speak, people listen. as we were putting on the screen, and i hope everybody saw that, you are the number one ranked hardware analyst by institutional investor magazine for 12 straight years. steve grasso, what's your question to the hall of famer? >> they have an awful lot of exposure to asia. we've heard nothing but negativity coming out of that zone. does that have you -- obviously it's about service contracts because the street's sentiment has been totally negative fwoing into earnings phase of ibm. globally, do you sit there and
say, do i sell it first and buy it on the cheap because the techtech techny cals look awful in the name? >> i think there is macro risk. they've had a couple service contract problems in japan. europe is over 30% of the revenue. currency for all these companies is going to be a headwind. probably three to four points of revenue growth year to year for ibm here. i think what we're going to see from ibm is probably weakish revenue but continued ability to manage the earnings line. that limits upside. portfolio managers love the name because of the cash flow and defensiveness. about half of revenue is occurring. >> apple you assumed coverage with a buy rating $740 price target. you are clearly an apple bull. yet you don't appear to be polly annic abosh about it. >> we do make the analogy to alexander the great. apple's building a consumer electronics empire. we think it's in the middle of building that empire which is why there's more to go.
you know, the fact is every 10 to 15 years technology totally changes. tech empires eventually crumble. you can't get complacent. we're also concerned tl eed the bit of a structural issue. how much can portfolios own of apple? currently 4% of the s&p 500. when companies get to that kind of a level generally they start to have some issues. apple is an interesting case of low valuation. clearly looks very cheap. versus questionable momentum. you know, the big numbers, it's fwot to slow a bit here. ultimately we think it's going to work to the upside. specifically if you look at the iphone introductions, the stock tends to trade in a range before and just after an introduction. and then take off. our guess is that's going to happen again with the iphone 5 which should be coming out this fall. >> mini ipad, tv as welcoming down the pike in your estimation? >> perhaps. the mini ipad about an eight-inch screen probably comes out toward the end of this year. in the past jobs has actually talked about the problems with that product.
at the time it was more android products, their competitors, that were there. i think they probably will fill that gap between four and ten inches. itv is tricky. margins in tvs aren't what apple is looking for. they've got to do something different there. my guess is they probably will do something. i'll believe it when i see it. >> joe terranova? >> steve, when you look at the upcoming back to school season, how much of an acceleration market share gain do you see from apple when you look at the competition? there's really no products being offered this year to compete with them? >> you know, it's tun funny. ten plus years ago we helped coin the term halo effect. the macintosh continues to gain share. 4% to 5% pc share. it's going to continue to gain. it's amazing what they've done in education. ipads are going into schools and so forth. there's more competition particularly in the tablet space with the microsoft surface and so forth. i think apple is still way ahead of the competition. the key to the stock is the iphone is two-thirds of profitability.
that's what's really going to drive things over the next 6 to 12 months and should probably be shipping towards october into early november. >> steve, we covered a lot of ground. we're grateful for your time today. thanks so much. >> thanks were having me. >> steve milunovich. >> i was going to ask steve, he's gone. what i was surprised on his initiation is emc. notable downgrades in that space, in the storage space. for steve to come out a buy at this stage is a little surprise. with apple, long. f go long apple. coming up on "halftime," chevron estimates slashed ahead of its interim results. we're trade the following forecast from the analyst who made that call. i'm making my money do more. ♪ i'm consolidating my assets. i'm not paying hidden fees or high commissions. i'm making the most of my money. and seven-dollar trades are just the start. i'm with scottrade. i'm with scottrade. i'm with scottrade. and i'm loving every minute of it. [ rodger riney ] at scottrade, we give you commission-free etfs,
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let's get a check on what's happening in the crude space today. see a nice spike there on those inventory numbers. wti crude is above $86 a barrel right now. that's nearly a move of 3%. let's continue to have a conversation about what's happening in oil. analysts on the street are chopping their forecasts. this morning citigroup cut q-2 earnings estimates for chevron citing the drop in oil prices. the firm also cutting its price target by 6 bucks. joining us on the fast line is
citi's faisel khan. you see what crude is doing. what do you make of the inventory number and where crude could go from here despite your forecast? >> for the rest of this year we're expecting crude to be in the 100 to $110 range on the brent side and $80 and $90 range on the wti side. next year we did slash our crude oil price forecast to $100 a barrel from $130. that was actually done last month. but with chevron, we cut our estimates to $3.12 per share. a $10 sort of drop in crude from first quarter to second quart perp also a decrease in domestic natural gas prices. also driving that estimate down. if you look at the downstream component of their earnings, you've got better downstream earnings from refining margins on the west coast. also lower ngo prices popping up those chemical margins at least domestically here in the u.s.
gulf coast. >> you still do have -- what, you do have a buy on the stock, though, right? >> absolutely. this is one of the stocks we think we should own for the next three to five years. >> i wanted to clarify that. even though you're decreasing the target and earnings. good to have you on the show. have you on again soon. you own this one? >> we own it. the interim meeting is tonight. if the stock is weak on any conservative commentary from the company which they typically are, we would be a buyer particularly under 100. i think the call here, i understand because prices are coming down. but you could make that call for the entire industry. i'm not sure why he singled out just chevron. we're a buyer on weakness. >> fair point. grasso? >> given his thoughts on crude, i'd be a buyer of valero. that's where i'm in. the refiner space. i like that. obviously there's a lot of talk about lng going a different rout there. i'm long both lng and vlo based on crude prices sfwl quickly, joe. i shortchanged you last time. >> quite all right. chevron, listen for the story in brazil next week. i agree with grasso. like at the refiners. that's the trade in 2012.
wnr. >> coming up on "halftime," our traders are fast but they're not always right. we're learning from their mistakes, after the break. barnes and noble soaring 30% in three months after a rough few years. is it officially back from the brink? our series continues as well when we come back. a passionate belief, and the foundation on which merrill lynch has been built. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before. a steadfast commitment to help you achieve your financial goals in life. that's the power of the right advisor. that's merrill lynch. ♪ ♪
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hot and hot and steamy in sometimes square. but it's going to be cool and fun on "power lunch." the biggest fight yet over your television set. directv facing off against viacom. see what the fight says about the future of how we pay for the shows we watch. mortgage applications continue to fall. we're going to look at whether ultra low interest rates have juiced the economy as much as they're going to. a lot coming up on "power lunch." before that, "fast half" returns in two.
all this week we are taking a look at stocks that could be back from the brink. after big plunge, after big plunges. these names are making a comeback and zeroing in on barnes & noble. let's bring in david strasser. welcome. >> hi. >> in doing research about the name before the show today, i think one of the most alarming things i found is that the ceo cut the holding by 4%. the first open market transaction since 2009. in may and june, four other executives sold shares for the first time in two years, as well. if these gentlemen, perhaps ladies, as well, don't have faith that the stock moves higher, why should anybody else? >> i mean part of that was a massive stake in the stock and
mid-20s. len riggio owns a significant portion of the stock. and they got almost a 60% or 70% move and probably somewhat prudent. >> give me the upsides then to the stock to believe that any kind of gain can continue. >> you have microsoft who's invested $300 million new company which is the education and nook business and 1.7 billion valuation on the business. the retail business is, you know, about $330 million of ebitda. you can argue a three to four multiplier and the net cash and include that, you have a stock that's valued in the low 30s and argue that's a conservative investment and doesn't take into account anything going all that right. >> what about the traders, simon? >> before coming on the show, i had to look up a nook.
1.7 billion valuation on that part of company is aggressive. >> they have 27% market share and you might not know that the -- you know, the product, as well, simply because it tends to be focused more towards american women for lack of a better way to put it but they have a high 20% market share in the ebook category if you talk and hear of the publishers so they have -- they're a dominant -- probably not the right word but a solid number two player in the category to be -- >> wait a minute. >> the nook caters to american women? where does that data come from? >> i would say women in the 30s and 40s, tends to where they're marketing and most successful. if american may not be the right word but they have a female demographic. they're on "desperate housewives." on "glee." >> you're digging a bigger hole.
>> why isn't microsoft tying the nook to surface then? >> you can get it on the surface. the nook is going to be the windows 8 product for e reading on all of their windows 8 products so they are, actually. it may not be definitive but they're working out the details but the idea to put it on -- that's going to be microsoft's go-to for ebooks. >> right. >> david, good to have you on the show. thanks so much. we'll talk to you again soon. >> you know, steve -- >> yeah? >> the american men reading -- not using the nook but the ipad. >> i don't know. i don't want to go there. grasso, what is your trade on this? >> yeah. i mean, you know where i'm at on this. i'm either amazon or apple on this. not to say you can't have a short covering spike here but i'd rather be on proven names versus some type of volatility fluctuations of here. >> stephanie, not from the midwest i know of but what's your trade?
>> not a nook player. no. i like microsoft, actually. and apple we own in the trust and we have for a long time. >> i love how he got "desperate housewives" in the conversation. >> listen to stephanie of may. >> energy's been one of the worst performing groups this year. there are bargains. look at the deepwater drillers. i think ensco is one to pick up on the cheap. >> no one's going to get 100% right. >> it is cheaper. >> that's a strikeout. >> down 13% or so since that call. >> energy down 20% from their highs. this is down 20% from the high. i like the deepwater market very much and headwinds to overcome and i think the quarter is going to be okay. we have been trimming because the stock is up but i still like
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final trades. grasso, kick us off from the floor of the big board. >> tyson, buy it here for a trade. 16.5 is the bailout level. >> oh wow. even with corn prices rising. >> i think it's overdone on a technical basis. >> does it with a smile. joe? >> keeps going higher. >> simon baker? >> cf industries. stay with the trend. >> stephanie? >> news corp. i like the split-up between the publishing company and cable company. it's a cheap valuation. >> you think it's anything from the fed minutes this afternoon that's tradeable? we'll get some maybe the option that is are being discussed for further down the road if need be? >> probably options but i don't know if the market will react. >> we'll see. that does it for us. don't forget to